Qualcomm Earnings: Soft Smartphone Demand and Macroeconomic Headwinds Create Buying Opportunity

Qualcomm reported fiscal second-quarter results in line with our expectations and management’s guidance. However, the firm provided a weaker outlook for next quarter than we had previously anticipated, due to ongoing macroeconomic headwinds and tepid smartphone demand alongside elevated inventories. Despite the industrywide outlook for a recovery in China consumer demand, management said they have not seen evidence of such a rebound, which is consistent with our views. Although we think the next few quarters will be challenging for narrow-moat Qualcomm, we anticipate a return to growth in fiscal 2024. We are maintaining our $140 fair value estimate. Shares fell 7% after-hours due to the disappointing outlook, which we think has created an attractive entry point for long-term investors that can look past an arduous near term.